Top Ships Inc (TOPS) 2009 Q4 法說會逐字稿

Thank you for standing by ladies and gentlemen, and welcome to the TOP Ships conference call on the fourth quarter and fiscal year 2009 financial results. We have with us Mr. Evangelos Pistiolis, Chief Executive Officer and President, and Mr. Alexandros Tsirikos, Chief Financial Officer of the company.

At this time all participants are in a listen-only mode. There will be a presentation followed by a question and answer session, at which time if you wish to ask a question (Operator Instructions).

I must advise you that this conference is being recorded today, Friday, March 12, 2010.

Before we begin, let me draw your attention to the fact that during the conference call we might make certain forward-looking statements about the company's future expectations, including future revenues and earnings. Those statements and all other statements here today, other than historical facts, are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934, and as that term is defined in the [Private Litigation] Reform Act of 1995. Such forward-looking statements involve risks and uncertainties and are subject to changes any time, and the company's actual results could differ materially from expected results.

The company undertakes no obligation to publicly update forward-looking statements to reflect subsequently occurring events or circumstances. The audit committee have reviewed and recommended to the Board the acceptance of the accounts for the fourth quarter and fiscal year 2009 as presented. And the Board of Directors has approved the accounts as presented.

We now pass the floor to one of your speakers today, Mr. Pistiolis.

Hi. Good evening ladies and gentlemen -- or good morning, for those [listening] in the States.

During 2009 we reached two very important milestones in the history of our company, in a very tough financial environment for the global economy and the shipping industry.

We completed our new building program by taking delivery of six product tankers from a well-established Korean yard, all of which were immediately chartered out at fixed rates for periods that range between seven and 10 years. These charters have been agreed on a bare-boat basis, which not only reduces our long-term market risk relating to the vessels, but also eliminates our operational risk for that period.

Secondly, we terminated the charters on the last five chartered-in vessels in our fleet. These vessels were product tankers, and their daily cost, taking into account lease hire payments and operating expenses, was significantly higher than the market rates that have been prevailing in the product tanker segment.

During the fourth quarter of 2009 we took an impairment charge on our two older tankers in our fleet. This was due to the fact that their present time charters expire during the current year, and we expect that future charters will be at lower rates given the market conditions that have been prevailing in the product tanker segment.

I would also like to bring to everybody's attention the impeccable utilization rates of the last quarter of 2009. We will do our best to maintain these rates going forward.

Looking to the future, we believe that we offer a solid growth platform due to the following characteristics --

We do not have any capital commitments.

We have a very young owned fleet made up of 13 vessels -- eight product tankers with an average age of 2.9 years, and five dry-bulk vessels with an average age of 8.9 years.

We have a diverse charter portfolio with significant value. 84% of total ship days until the end of 2011 are under fixed employment, and the gross revenue that we expect to receive from these charters amounts to approximately $151 million. Looking further into the future, 75% of our total ship days until the end of 2012 are under fixed employment, and the gross revenue that we expect to receive from these charters amounts to approximately $199 million.

Now I would like to pass on the call to Alexandros to discuss the financials. Thank you.

Thank you. Good morning ladies and gentlemen.

For the fourth quarter of 2009 we reported a net loss of $35.9 million or $1.20 per share. These results include an impairment charge of $36.6 million relating to the write-down of the older two of our tanker vessels to their fair market values. Excluding this impairment charge, the net loss would have amounted to a net income of $0.7 million -- $700,000 -- or $0.02 per share.

Also during the fourth quarter of 2009 we reported an operating loss of $31.7 million. Excluding the impairment charge of $36.6 million, operating loss would have turned into an operating income of $4.9 million

Our revenue for the same period were $24.4 million.

Now, for the year ended December 31, 2009, we reported a net loss of $50.2 million, or $1.78 per share. Excluding net expenses of $12.2 million relating to the termination of leases and the impairment charge of $36.6 million, the net loss would have amounted to $1.4 million, or $0.05 per share.

Also for the year ended we reported an operating loss of $34.2 million. Excluding the aforementioned expenses relating to the termination of leases and the impairment charge, the operating loss would have turned into an operation income of $14.6 million.

Our revenue for the year were $108.0 million.

In relation to our outstanding indebtedness as of December 31, 2009, we had total indebtedness under senior secured and unsecured credit facilities with our lenders of $404.3 million with maturity dates from 2010 out to 2019.

In relation to loan covenants and our discussion with banks, as of the date -- as of today we have received waivers and signed amendments to our loan agreements with all five of our lending banks in relation to certain loan covenant breaches that have occurred since December 31, 2008.

However, as of December 31, 2009, we were in breach of additional covenants with all of our banks, which had not been previously waived. These breaches relate to EBITDA, overall cash position relating to minimum liquidity covenants, the adjusted net worth, and the asset value cover of our product tankers with certain banks.

As of today we are in discussions with all banks to receive waivers for these breaches. We expect that our lenders will not demand payment of our loans before their maturity, provided that we pay loan installments and accumulated of accrued interest -- or accrued interest as they fall due under the existing credit facilities.

Due to these breaches the company expects to classify all of its debts and swap facilities as current in its audited annual financial statements for the year ended December 31, 2009.

Now, in relation to the passive foreign investment company status, we confirm that we will be treated as PFIC for 2009, and we will be providing all necessary information to allow shareholders to make necessary elections and prepare their tax filings on our website, www.topships.org, by the end of March.

Now I will pass it back to the operator for any questions.

(Operator Instructions). [Jeff Leonardo], Oakwood Asset Management.

What are your growth plans? And what sector would you look towards?

Well, I've done a lot of thought on this issue -- on both actually, because there are two parts of your question. On the first part, I think we -- I have -- we have not decided yet how to proceed with the growth of the company, unless of course staying the way we are, which makes sense, because after certain issues we could see that we are now -- it's all over, and I think we have a very, very good platform to grow from here. Of course the market needs to improve a bit, which is really not in our control.

Now, as far as what I would do if I would grow tomorrow, I think that the sector that really makes more sense long term I think is the tanker sector today. The dry sector -- not bad. It has kept its rates better than expected, if you want, and better than most anticipated or the analysts foresaw, if you want, for 2009 and 2010. But I think that the order book will catch up eventually at some point.

Of course the growth rate of China is really strong. I think it's stronger than what is being announced, and the reason I believe that is because I see a great speed, if you want, in absorbing the tonnage that comes into the -- into the dry-bulk sector, so I believe that that 8% or 10% that they announced, I think they -- it's so large we can't even measure it properly -- the country, I mean, is large -- and the amount that people know about it, and the dynamics that you have behind it.

But of course the order book is targeting -- even if you take out whatever, 20%, 30% or whatever out of the reported order book, it's still bit.

But we'll see, because the market has surprised us many times in the past six, seven years, and we are ready for new surprises.

On the tanker side, now I think that it is -- it could make sense, and we know that young ships are very good for tankers, are very different from the older ones in terms of a charter rate they can achieve, etc., and of course we have the (inaudible - microphone inaccessible) which just started a couple of months ago, so I think that will have an impact. And the order book is about 30%. So it's not (inaudible - microphone inaccessible) it's not really big, it's good. And we have about 10% or a bit more exiting the market with the [a favor] in the year, and we've got 30% in three years. So it could look good at the end of the year for tankers, could look good at the end of 2010.

Great, thank you.

Robert [Turitello], [Rue Fideo] Asset Management.

The time charter on the Dauntless is set to expire in Q1. Have you started negotiating a new time charter? Or planning on putting it on the spot market?

Yes, we have started three months ago. It is finishing about 15 days from today. We have -- we are in talks with the current charterer also to extend, and we are in talks with two further charterers to make new deals.

The new deals that we are looking at are about, I hope, two, three years. I am not at liberty at this point to disclose the rates. It's market related, and it should be a two-, three-year deal. Nothing has been completed yet, though, but we hope to get something done soon. If not, we are going to do a spot market, but I think we're going to find some employment for the ship.

Great, thank you.

Adam Fleck, Morningstar.

A question about the rates on the Cyclades and the Pepito. They're -- seem to be at pretty healthy rates, and you've gotten some pushback from your tanker customers, and I'm wondering if you're getting any pushback on those rates from those charterers.

Not really. We have -- [that is] I think pretty much well known, after a few articles that we had. I think that it's well know that I'm not really negotiating with the current charterers, as I cannot negotiate the prices that we bought the ships back then, so it was a package (inaudible - microphone inaccessible), if you want. So -- but they can even -- you're right, they can try, but we didn't have any recent let's say phone calls from them, any recent e-mails, etc., suggesting something like that. So we -- as you can see, we continue with the current rates.

Great. And then a question about your SG&A in the quarter. It seemed to jump up a little bit sequentially. It looks like part of that was due to some stock-based compensation. I'm just curious if you can provide any more clarity on that.

Yes, I mean the -- there have been a few stock -- stock-based compensation that was given to certain people -- sorry -- employees of the company. But what kind of clarity would you like? You can have anything you want, but it's a long list, and I don't think that it's really --

Sure.

-- appropriate to give out really today. But it was given to some of the -- we haven't given bonuses for -- or at least anything significant to management for years, for three years or so have -- we haven't given any bonuses to the upper management. And to the staff, we've given some we'd say minimal or the minimum we could in order not to start losing people.

So I think that after the good work that was done at the end of '08, we -- mid '08 -- excuse me -- we managed, as you know, to sell all the ships at the -- or all the older ships at the high level before they dropped like 70%, 80% of the value, literally like 10 days less if gone 10 days before Lehman, and taking consideration of that, and also the work that was done on the cancellation of (inaudible - microphone inaccessible) and all the work that was done, and the good timing on the chartering of all six new builds in time [periods] for 10 years. That was, as you know, in August '08, so a month before Lehman, at levels that today are not even a marginal (inaudible - microphone inaccessible). I think that it's about time to reward the people that worked for it as well.

Sure. Great. Thanks a lot.

Paul [Bornstein], Black Diamond.

Just had a question about since you've kind of revamped the company and now hopefully we are going to have clean quarters going forward -- because I can't remember the last time there was a clean quarter, without charges and what have you -- would you be better off if you left your fleet what it was prior to getting into the dry bulk? Because I'm trying to get -- understand what's the leverage you'll have going forward, and the amount of money you've spent, and what kind of returns you'd get on that money, and what the payback was -- would be, in your estimation, for revamping the company and driving everything down, because obviously you're in a commodity business somewhat, and we all know what happened with the environment. But just trying to get a thought process from the management.

And hopefully you're going to sit on your hands until there's some return on the funds that were spent over the last three or four years, and you're not going to go into anything else.

Yes. (inaudible - microphone inaccessible) The first part of your question was before the company went into dry bulk? Was that the question?

Yes. I'm trying to understand what kind of return you're providing for shareholders, unfortunately at a bad economic environment, but -- which maybe we'll factor in. But that hurt everybody. And I'm just trying to -- I wonder, for the amount of money you've spent, which was significant including the debt that's still on the books, what kind of return can we get as a shareholder going forward? And I'm still not very clear on that.

Okay. I mean the -- I do not have specific numbers now, but I can give you (multiple speakers)

Well, I'm not looking for specifics (multiple speakers)

Yes. Okay.

-- more estimations. And I mean (multiple speakers) and can we get a payback in five years? 10 years? 20 years?

Sure, I'll tell you. We are looking on the -- for example, on the new buildings we've paid -- and as you know of course, they were ordered in the old economic environment, as you called it, and of course on the dry bulk ships, which were, again, paid in the old economic environment, thank God we had chartered all those ships, again, in the old economic environment.

What I'm trying to say is that we did pay higher amounts -- sorry -- we did pay the market. Back then of course it was higher than today, so we did pay the old market in terms of values, but we also got the old -- higher profits. So on the tankers for example, where we have those 10-year contracts, we are looking at about -- on a constant cash, we're looking at about 12%, 13%, which is extremely high considering the amounts -- especially considering the amounts that were paid to order the ships; right?

Yes.

On the dry bulk we got -- we still have -- as the previous guy asked me, as well, we still have the high charters, which were I think -- one of them was the highest ever achieved in the last three years or so. It's $[54,000] or so, for three years. We have those charters which, again, provide on a constant cash basis even higher returns on the tankers. So I think that -- let me put it this way, if -- as long as the charterers -- and we thank God we have picked solid, good names -- hold, we're looking at good returns, especially, like you said, after revamping the company and cleaning up whatever has to be -- had to be cleaned up. I think that going forward the specific have good returns for the investors.

I would also like to add that we also have a very diverse portfolio of charters, which is, again, is a very positive aspect to that. It really helps too, so we have many (inaudible - microphone inaccessible)

Okay, so (multiple speakers) since your whole fleet's clean --

(multiple speakers) the security we want.

Right. Since your whole fleet is cleaned up now, we expect clean quarters going forward, we don't have to look at any kind of charges or [hits] (multiple speakers)

No, the (multiple speakers)

Because it seems like everything is recurring. So I'd like to see what a clean quarter looks like.

Yes. Yes sir, you're right. Like -- last -- you have seen the last -- the last quarter was also a (inaudible - microphone inaccessible) quarter. Of course the impairment is something that (inaudible - microphone inaccessible) now, but it will help the company going forward because we'll have less depreciation, etc., and so you can look at it (inaudible - microphone inaccessible) point of view.

And of course we -- as far as your question of charters, etc., I cannot imagine anything that could come up, unless the world turns upside-down, because the ships that we have, we'll have them, we are okay with the banks, we are okay with the charterers, and I believe that we're going to have pretty much the straight quarters going forward, yes sir.

Okay. So it looks like you should start seeing some profitability finally.

Exactly.

It's been a long time, a (multiple speakers) very long time.

We agree (multiple speakers)

So (multiple speakers) I've really got a question. We'll see how good it is.

Yes (multiple speakers). Thank you very much.

So -- because that will tell me how good the management is.

Yes, of course. You're right.

Okay. Yes. Thank you.

Thanks a lot. Bye.

[Peteros Caligas], Delos Investments.

I've got a question regarding the Tyrrhenian Wave and the Ionian Wave. You've mentioned that there is -- that you're receiving a reduced charter. Could you update us on what discussions there are? And how long you expect this reduced charter to prevail?

Yes. The -- there has really nothing happened since the last press release. We are at the presence where we were at the beginning, which is 30% less. It's important to mention here that even the remaining 70% is well, well, well above the current charter markets, and when I say current, I don't mean just this month, I mean the last let's say one year. So the 70% is very good money.

And on your question as to how long it will last, well, that's a good question, because I don't know. The reason why I don't know is because it really is related to two things. One is the market conditions, and the other one is the condition -- the internal (inaudible - microphone inaccessible) financial condition of the charterer.

If you want my guessing on it, I believe that 2010 will be reduced. (multiple speakers) 2011, after the phase-out (inaudible - microphone inaccessible) market returns to better numbers, let's hope that the charterer makes it through the bad times, which I think after the (inaudible - microphone inaccessible) he will, and let's hope he'll make better profits in -- or top it, if you want, in 2011 so we can have back the money that [was] reduced.

Oh, so you expect to receive a sort of -- the money that you won't receive in 2010, you're going to receive it in 2011? That's what you're expecting?

Yes, that is correct. The [variability] is not done yet, but we (inaudible - microphone inaccessible) understanding our agreement will come at the later stage that is being done is that it's not money that is gone down the drain, it's money that we will receive back when market conditions improve. In other words, that 30% that was cut off now is not really gone, it's postponed for a later time when markets will improve, so when the market does come back, which it will because it always does at some point, then we'll get back not only (inaudible - microphone inaccessible) but also the 30% that we have been reduced at this present time.

Thank you. Just one very small question regarding the interest income you report, which is -- I know it's only $18,000, but considering that you had zero cash, how did this happen? I mean, just conceptually.

The zero cash is actually -- on our balance sheet it's zero cash because it's restricted cash under our loan covenants (multiple speakers)

We do have cash (multiple speakers)

We do have the cash, yes.

In the millions, which is not accessible. It is -- and the loan covenants will restrict the cash, but (multiple speakers)

Oh, okay. Okay. (multiple speakers) Okay. The twenty -- the 22.2.

Yes.

Which is interesting, okay. Thank you very much.

Steve [Rubin], [Candlelight Management].

Why is the price where it is? And are you pleased with the market valuation?

The answer is straight no. Why -- on the first part, which is the why, of course it's not very easy to answer. I will try. But on the second part, it's -- the answer is no. We are not happy at all.

Now, if you look at the -- you can have two valuations, if you want. One is the valuation which is let's say that NAV, as they call it, which is a bit hard to define in shipping, but as [they call] the NAV, [it's the] assets against loans plus cash, the stock price should be maybe a bit -- just a bit higher. But of course a company is a living creature, and you can't just take it as to the face value of it, or the loans, and you have to see also the income that goes -- and the contracts, which are the great value that go with it; right? So when you take the context in there, I think they should be looking at at least $3.50 on the current valuation.

Now, we will -- we have started with a couple of months ago, again, a campaign which will go into this year trying to get the message across as to the -- as to what the fair valuation of this company should be, including the contracts, because the contracts are very solid contracts. They're not (inaudible - microphone inaccessible) at a company that is (inaudible - microphone inaccessible) its contracts which are very solid worldwide shipping charterers. So I think they should be taken into account. So that's something we are -- we have started like a month ago working on it again very [harder], and I think we're going to be in the States as well at some point later this month or the beginning of next month, and we'll try to get the message across as to what kind of contracts, the quality of them, and we -- and the actual amounts that are involved in this.

Okay. Thank you.

There are no further questions at this time. Please continue sir.

If there are no further questions, we are okay here.

There are no further questions.

Okay, very well. Thank you very much. You can now disconnect your lines.

That does conclude our conference for today. Thank you for participating. You may all disconnect.